FC Lahti was founded in 1996 when two time-honoured archrival clubs from Lahti - FC Kuusysi and Reipas Lahti (Founded in Viipuri and moved to Lahti after Viipuri was ceded to USSR in 1947) - decided to end their time in Finnish top-football and create a new club to make people of Lahti proud. Also the reserve club FC Pallo-Lahti was formed, but it was closed down after a couple of seasons due to economic difficulties. Both Reipas and Kuusysi controlled the junior section of the club.
FC Lahti played its first season, 1997, in the southern group of Ykkönen, the second tier of Finnish football. It finished second in the first half of the split league format type league system, but was placed third in the final half behind FC Haka and PK-35 which were promoted to Veikkausliiga. The next season, 1998, was victorious and FC Lahti finally gained promotion to the highest tier until relegating at the end of the season 2010.
In the premier division Lahti hasn't yet achieved as much as Kuusysi and Reipas did. In 2007 Lahti won the Finnish League Cup. In 2008 FC Lahti was third in the Veikkausliiga final table and took a place for Uefa Europa League qualification rounds season 2009.
Lahti were Liverpool’s first European opponents following the English club European ban in the wake of the Heysel disaster. Although they lost the first leg at Anfield 1–6, they defeated Liverpool 1–0 in the second leg in Finland thanks to a goal from Mike Belfield.